Commissioner Of Income Tax-Vi vs Visual Technologies India Pvt Ltd
2012 Latest Caselaw 33 Del

$~10
*    IN THE HIGH COURT OF DELHI AT NEW DELHI

+      ITA 1873/2010

%                          Date of Decision : 3rd January, 2012.

       COMMISSIONER OF INCOME TAX-VI            ..... Appellant
                      Through Mr. Sanjeev Rajpal, Advocate
               versus

       VISUAL TECHNOLOGIES
       INDIA PVT LTD                                ..... Respondent
                     Through            Mr. Salil Kapoor, Mr. Sanat
                                        Kapoor, Mr. Ankit Gupta and
                                        Mr. Vikas Jain, Advocates
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE R.V. EASWAR

1. Whether Reporters of local papers may be allowed to see the
   judgment?
2. To be referred to the Reporters or not ?
3. Whether the judgment should be reported in the Digest?


SANJIV KHANNA,J: (ORAL)
       The present appeal is filed by the Revenue under Section 260A
of the Income Tax Act, 1961 (the Act) impugns the order dated
17th March, 2010 passed by the Income Tax Appellate Tribunal, Delhi
(the Tribunal) in the ITA No.3214(Del)2009 for the assessment year
2006-2007.         The question relates to deduction of Rs.83,60,017/-
claimed by the assessee under Section 80IC of the Act.
2.     The Tribunal in the impugned order dated 17th March, 2010 has
upheld the findings of CIT(A) that the new industrial undertaking set
up by the assessee in the assessment year 2005-06 at Dehradun
qualifies for deduction under Section 80IC of the Act and the said
ITA No.1873/2010                                              Page 1 of 6
 undertaking was not established by re-constructing the business/
manufacturing activities of M/s Broadcasting Equipment (India) Pvt.
Limited.
3.     The Assessing Officer had held that the industrial undertaking
set up by the assessee at Dehradun did not qualify for deduction under
Section 80IC as the said premises was taken on rent at Dehradun; the
rent agreement, in writing, was for a short period which had lapsed; the
date of installation of electricity connection was 26th October, 2004,
whereas, as per the audit report under Rule 18BBB in form No.
10CCV, the date of commencement of operation was mentioned as
01.09.2004. Certain other aspects with regard to minimal expenses
incurred by the unit at Dehradun were noticed.
4.     The CIT(A), however, deleted the said disallowance after
referring to the documents filed before the Assessing Officer by the
respondent/assessee    to    prove    the   existence    of    Dehradun
unit/undertaking. The said documents are mentioned in paragraph 6.4
of the order of the CIT(A) dated 1st May, 2009, and the same is
reproduced below:-
              "TDS Certificate on rent.
              Details of rent
              Confirmation of factory/ rent agreement directly
       sought by the AO from landlord and site plan.
              Photograph of the factory premises furnished to AO.
              Direct enquiry by the AO from DDI (Iniv.)
       Dehradun and reply of the assessee.
              Sales registration certificate dtd. 31.08.2004 w.e.f.
       19.08.2004, issues after physical inspection of the factory.
              Registration certificate with Director of Industries
       dtd. 26.08.2004.
              Pollution clearance certificate dtd. 27.08.2004.
              Electricity connection evidence issued after physical
       inspection.
              Registration Certificate from excise Deptt.
ITA No.1873/2010                                              Page 2 of 6
         Mentioning the commodity being manufactured issued
        after physical inspector.
               Machinery A/c and Machinery purchase bills.
               Sales Tax Asstt. Orders
               Documents showing purchase of raw material of
        Dehradun."


5.      With regard to the issue of reconstruction and purchase from
M/s Broadcasting Equipment (India) Pvt. Limited, the CIT(A) has held
that M/s Broadcasting Equipment (India) Pvt. Limited was never
engaged in any manufacturing activity thus, no unit/undertaking was
sold.   The CIT(A) has recorded that M/s Broadcasting Equipment
(India) Pvt. Limited were in the business of trading in audio and video
equipments and other electronic goods etc. Accordingly, plant and
machinery was sold by M/s Broadcasting Equipment (India) Pvt.
Limited to the respondent-assessee and were installed at the Dehradun
unit/undertaking. M/s Broadcasting Equipment (India) Pvt. Limited
was never engaged in the manufacturing activity and therefore as a
trader had only sold the plant and machinery to the assessee company.
The respondent-assessee had claimed benefit under Section 80-IC in
the assessment year 2005-2006, which was the first year after the
unit/undertaking situated at Dehradun was set up and had started
operations. The Assessing Officer in the assessment year 2005-06 had
accepted the submission of assessee that it was eligible for deduction
under Section 80IC. The CIT, however, had issued a notice under
Section 263 of the Act. The assessee submitted/furnished its reply vide
letter dated 16th March, 2009. Once the documents were produced
before the CIT, the revisionary proceedings were dropped.
6.      In view of the factual findings recorded by the CIT (A), which
have affirmed by the Tribunal, we do not find any infirmity or reason
ITA No.1873/2010                                            Page 3 of 6
 to interfere with the same. The appellant has not placed any material
or documents on record to show that the factual findings recorded by
the CIT (A) and the Tribunal are incorrect and which are required to be
interfered with.
7.     The next question pertains to quantum of deduction under
Section 80IC.      Learned counsel for the respondent-assessee has
submitted that no such question has been raised by the Revenue in their
appeal.    Under Section 260A, the said aspect can be raised and
answered as a substantial question of law, if the same arises from the
order passed by the Tribunal. (see Section 260A(6) of the Act). The
said question/aspect does arise for consideration, in view of the
findings recorded by the Assessing Officer and the question/issue
examined by the Tribunal as is reflected from paragraph 1 of the order
of the Tribunal. Accordingly, we are inclined to frame the following
substantial question of law:-
       "Whether the Income Tax Appellate Tribunal is right in
       allowing the deduction of Rs.80,63,017 under Section 80-IC
       of the Income Tax Act,1961?."

8.     We have heard counsel for the parties on the said question and
proceed to answer the same.
9.     The Assessing Officer while examining deduction under Section
80-IC in paragraph 3 of the assessment order has recorded that against
an overall turnover of Rs.25.14 crores, the turnover of the Dehradun
undertaking as declared was Rs.1.45 crores and as against this, the
corresponding profits, before various provisions, were shown as
Rs.2.36 crores and Rs.83 lakhs, respectively. After reducing the
miscellaneous income, the actual profit from the entire business
operations was Rs.1.48 crores, out of which Rs. 83 lakhs were shown

ITA No.1873/2010                                           Page 4 of 6
 as earned by the Dehradun undertaking eligible under Section 80IC on
a turnover of Rs.1.45 crores.     The Assessing Officer doubted the
turnover of Rs.1.45 crores and the profits of Rs. 83 lakhs as declared.
He made reference to the additional information pursuant to the
provisions of paras 3, 4C & 4D to Part-II of Schedule 6 and observed
that no manufacturing activity was undertaken at the Dehradun
undertaking. The Assessing Officer noticed and has recorded that as
per profit and loss account of the Dehradun undertaking, nominal
amounts were shown as power and fuel expenses (Rs.29,986/-), freight
inward (Rs.30,273/-) , freight outward (Rs.18,389/-) etc. He further
observed that it was not clear how expenses of Rs.12,34,999/- had been
allocated/appropriated to the Dehradun undertaking.
10.    The CIT(A) in its order dated 1st May, 2009 did not examine the
question of quantum of deduction under Section 80IC. This aspect has
also not been examined and dealt with by the Tribunal.
11.    The assessee may be eligible under Section 80 IC but the
quantum of deduction is an incidental but an important aspect which
must be considered and examined. The Tribunal did not examine the
said aspect inspite of the factual matrix referred to and stated in the
assessment order. The data and details in the assessment order remain
uncontroverted and    not adversely commented upon. The Tribunal
without examination has upheld the order of the CIT(A), which entitles
the assessee to claim deduction of Rs.83,60,017/- under Section 80-IC
for the assessment year 2006-07.       The question of quantum of
deduction was not examined by the Tribunal.
12.    Accordingly, the aforesaid question of law is answered in favour
of the Revenue and against the assessee.
13.    The matter is remitted to the Tribunal to decide afresh the

ITA No.1873/2010                                           Page 5 of 6
 quantum of deduction under Section 80IC of the Act. The appeal is

disposed of. No costs.

14.    Parties will appear before the Assistant Registrar of the Tribunal
on 27th February, 2012, when a date of hearing will be fixed.




                                       SANJIV KHANNA, J.

R.V.EASWAR, J. JANUARY 03, 2012 b/Bisht